GeoVera seeks debut catastrophe bond, with $150m Veraison Re quake deal

Specialty earthquake-focused residential property insurance company GeoVera Insurance Holdings, Ltd. has entered the catastrophe bond market for the first time, sponsoring a $150 million debut earthquake cat bond issuance, Veraison Re Ltd. (Series 2023-1).

GeoVera is a fast-growing catastrophe exposed property and quake focused primary writer, and counts former United Insurance Holdings (UPC) CEO John Forney, an insurance-linked securities (ILS) user, as its Chief Executive Officer.

GeoVera has established vehicle that will be licensed as a special purpose insurer (SPI) in Bermuda called Veraison Re Ltd. for the purposes of issuing catastrophe bonds, Artemis has learned.

For its debut cat bond, GeoVera’s new SPI Veraison Re Ltd. will seek to issue two tranches of Series 2023-1 notes, that will be sold to investors and the proceeds from that sale used to collateralize underlying excess-of-loss reinsurance agreements between the SPI and GeoVera itself, to pass on the coverage.

The Veraison Re 2023-1 catastrophe bond issuance is targeting $150 million of reinsurance protection for GeoVera and subsidiaries, with the notes issued set to provide it a source of US earthquake reinsurance cover.

That US earthquake reinsurance from this Veraison Re cat bond will cover GeoVera over a three-year term, across three annual risk periods, but with the first only beginning at March 2023, we’re told, so with maturity at the start of March 2026.

As a result, these notes will be issued off-risk for their first few months, with a 2.5% per annum spread to be paid to compensate investors until the first annual risk period kicks in.

Veraison Re will issue a $75 million tranche of Class A notes, that will have an attachment point of $675 million and cover a percentage of losses up to $940 million, we understand.

The Class A notes will come with an initial expected loss of 0.65% and they are being offered to investors with coupon guidance of 6% to 6.5%, we’re told.

An also $75 million tranche of Class B notes are being offered as well, that will have an attachment point of $250 million and cover a percentage of losses up to $350 million, so being riskier.

The Class B notes will come with an initial expected loss of 2.91% and are being offered to investors with coupon price guidance of 9.75% to 10.5%, sources said.

We’re also told that this is predominantly a California earthquake cat bond, given more than 80% of the expected loss for each tranche of notes is attributed to that state in the modelling, with Washington state the next biggest and so making this a largely west coast risk.

It’s encouraging to see another new catastrophe bond sponsor coming to market in 2022, also one that is bringing a non-wind exposed cat bond.

The multiples-at-market, especially for the Class A tranche, look far higher than similar US quake cat bonds of previous years, reflecting the general hardening of reinsurance and ILS capacity. It will be interesting to see whether they are high enough though and how pricing settles after these Veraison Re cat bond notes are marketed to investors.

You can read all about this Veraison Re Ltd. (Series 2023-1) in the extensive Artemis Deal Directory that includes details on almost every cat bond ever issued.